Risk paying for bad advice
The cost of the advice given to pensioners by Edenvale-based financial adviser Deeb Risk and his company, D Risk Insurance, to invest in property syndication schemes continues to mount – but the cost of the advice is growing for Risk, too.
Financial advice ombud Noluntu Bam has ordered Risk to pay compensation of R815 000 to yet another pensioner. This is on top of the R3.08 million that Risk has been instructed to pay to five other pensioners, aged 70-plus, whom he advised to put their savings into Sharemax property syndications that subsequently imploded.
In September, Risk failed to have the High Court prevent Bam from making determinations against him. Risk launched the High Court application in an attempt to force the pensioners to take the lengthy and expensive route of suing him in the High Court for their losses.
Risk, who is still a licensed financial services provider, is waiting to hear whether the Financial Services Board’s Appeal Board will consider his appeals against Bam’s rulings.
In his High Court application, Risk also attempted to stop Bam from dealing with the case in which she has issued her latest determination against him.
Bam upheld a complaint by Jannet Bujok that she received unacceptable advice from Risk about a number of investments in Sharemax to the total of R815 000. The last of these investments, for R220 000, was made in June 2010, less than two months before the income payments from her earlier Sharemax investments dried up.
Bam found that Risk contravened the Financial Advisory and Intermediary Services Act and its code of conduct.
The contraventions included:
* Incorrectly advising Bujok that the property syndication investments were low to medium risk.
* Not providing Bujok with sufficient advice to enable her to make an informed decision about the investments, particularly on the high risk exposure to her capital.
* Being negligent in his advice, because Risk failed to apply his mind to how much investment risk Bujok could tolerate given her circumstances and the risk she was prepared to take. Risk failed to recommend a product appropriate to Bujok’s risk tolerance and financial needs.
* Failing to act with due skill, care and diligence in the interests of Bujok and the integrity of the financial services industry.
The Ombud for Financial Services Providers is Noluntu Bam.
Telephone: 012 470 9080
Fax: 012 348 3447
Post: PO Box 74571, Lynnwood Ridge, 0040
Email: [email protected]